[R]2:00PM New York - Lennar reported not only a loss in the quarter but a decline in revenue, higher order cancelations, and a sharp fall in new orders.[/R]

Lennar Corp (LEN: chart) stocks plunged 6.5% to $22.50 at the opening after reporting revenue plunged 44% to $2.2 billion in the third quarter ended August 31, 2007. The results showed the depth of housing market recession and suggested that pain the housing sector may last longer than anticipated by most investors.

The company reported third quarter net loss of $513.9 million or $3.25 per share compared to earnings of $206.7 million or $1.30 from a year ago. Analysts predicted a loss per share of $0.55 according to a survey from Thomson Financial.

For the nine months to August 31, Lennar Corp home sales’ turnover slumped 31% to $7.5 billion from $10.8 billion a year earlier on 27% decline new homes and 7% fall in average sale price. For the nine months new homes built dropped to 24,772 units against 33,747 delivered during the same period in 2006.

In the quarter, Lennar said turnover was dragged by a 41% decline in new home deliveries to 7,266 from 12,337 a year ago, and a 6% decrease in the median sale price of homes delivered in 2007. The average sale price for new homes fell to $296,000 from $316,000 last year. New home orders fell 48% to 5,804 units with at least 32% orders cancelled. The company wrote downs home loans worth $847.5 million.

The homebuilding unit reported a loss of $787.7 million with debt falling to $212.8 million resulting in a homebuilding debt to capital ratio of 33.5%. The Financial Services division posted an operating loss of $5.2 million against earnings of $61.7 million last year. The decline is due to a partial $9.3 million write off on notes receivable, and generally a depressed housing market.

In the quarter, land sales reported a loss of $344.7 million, which includes a write off of $242.5 million on deposits and pre-acquisition costs related to 15,000 home sites, which the group has an option not to acquire. In 2006, third quarter loss on land sales totalled $0.3 million. Equity in loss from unconsolidated entities was $127.4 million from $5.9 million in the quarter a year ago.

Lennar, which has already cut down workforce by 35% in Q3 targets to cut more jobs in fourth quarter to reduce costs. The group does not expect volumes to rise in Q4 saying in a statement: “We also have, and continue to, reduce overhead to be ''right-sized'' for new and anticipated lower volume levels. The combination of moving our stated inventory to current market valuations, ''right-sizing'' our overhead to reduced volume levels and a stabilisation of market conditions should ultimately bring us back to profitability.""""""""

In February 2007, the group’s LandSource joint venture admitted MW Housing Partners as a new strategic partner. The transaction resulted in a cash distribution to the company of $707.6 million. The Company''s resulting ownership of LandSource is 16%. If LandSource reaches certain financial targets, the Company will have a disproportionate share of the entity''s future positive net cash flow. As a result of the recapitalisation, Lennar recognised a pre-tax gain of $175.9 million in 2007.


The total backlog at the end of the quarter fell to 6,300 from 16,008 from a year ago and new orders fell to 21,000 from 32,000 a year ago. In the quarter the company delivered 7,600 homes compared to 13,000 a year ago and received 5,800 orders compared to 11,056. Backlog of home in values fell to $2.2 billion from $5.6 billion.

Analysts are still lagging in their estimates reflected in the Thomson survey. Analysts are looking for 61.3% rise in the fourth quarter revenue, in the current business climate a remote possibility.

In the previous 52 weeks, Lennar share price has touched a peak of $56.54 and a low of $24.05 and analysts are likely to lower current one year target price of $35. Lennar has market cap of $3.88 billion.